Water utility widens revenue stream

The capital’s listed water utility inaugurated a new treatment facility yesterday that will increase its production capacity of clean water by 30 percent, and add to its revenue stream – a move likely to impress its shareholders.

Phnom Penh Water Supply Authority (PPWSA) officials opened the Niroth 2 water treatment plant on the southern outskirts of Phnom Penh, a $61 million complex that will allow the company to produce an additional 130,000 cubic metres of water per day to supply a growing and thirsty city.

The new facility increases the company’s total production capacity to 560,000 cubic metres a day, allowing it to expand services to Takhmao City in Kandal province.

Prime Minister Hun Sen, who attended the inauguration ceremony, said that despite the added capacity, PPWSA would continue to purchase water from private companies.

“A task that PPWSA must do is to buy water from private companies in communes that in the past were under provincial administration, but are now in Phnom Penh,” he said, referring to 20 communes that were formally adopted into the city limits in 2012.

He said the government would provide funds for the water utility to increase its purchasing power, ensuring that it honours its commitments.

“We need to inject more capital into the company so that it can purchase water from the right suppliers and from those who it still has contracts with.”

In 2012, PPWSA became the first company to list on the Cambodia Securities Exchange (CSX), floating a 15 percent stake. The company, which derives revenue from water connection services and the sale of treated water, has struggled in recent years to improve its margin.

According to its 2016 annual report released on Tuesday, PPWSA’s revenue grew by 3.57 percent last year to $49.5 million while net profit fell by 13.5 percent to $12.3 million. The company will pay out $3.5 million in dividends to common shareholders by the end of the month.

Svay Hay, CEO of brokerage firm Acleda Securities, said the Niroth 2 water treatment plant would allow PPWSA to expand its business operations, resulting in more revenue and higher returns for its shareholders. He said the expansion should help attract more long-term institutional investors that look for larger dividend payouts.

“Now that PPWSA has the ability to earn larger revenues, it should help attract more investors to buy the company’s stock,” he said.

The company’s shares on the CSX, however, closed down 40 riel yesterday at 3,960 riel amid low-volume trading.

Lamun Soleil, director of marketing operation department at CSX, said it was not surprising that the treatment plant’s inauguration failed to push the company’s stock price up as the Niroth 2 project had been known for years.

Nevertheless, he said the new facility would likely spur more business activity as the company reaches more consumers.

“With Phnom Penh’s massive expansion in recent years, PPWSA will have to increase its activities to cover new customers,” he said. “So its operations will also increase in size.”